How we use Contracts.

Common Mistakes relating to contracts. Not only are contracts an important part of doing business, they are an important part of everyday life. In this post, I will address three of the more common mistakes people make when it comes to contracts. These are the common contract mistakes that most often land people in court.

Contracts We Use in Business.

In business, we use agreements for many purposes. For example, we use agreements to:

  • hire workers, whether they are employees or contractors,
  • purchase products and services,
  • sell products and services,
  • collaborate with others,
  • share our work,
  • protect our content,
  • protect our brand,
  • protect our inventions, and
  • for so many other reasons

Contracts We Use in Everyday Life.

In everyday life, we also use and enter into agreements when we

  • Purchase items for our home, e.g., appliances, television sets, furniture,
  • Purchase services for our home,  
  • Buy a vehicle,
  • Purchase electronics,
  • Hire contractors,
  • License cable service,
  • Download software,
  • Leave assets to beneficiaries

Common Contract Mistakes.

Indeed, entering contractual relationships is a part of life. Yet, all too often we don’t see it as an important part of life. We sometimes take these transactions for granted by neglecting the business aspect of entering into agreements.  We often tend to treat contracts casually and as a result, we make mistakes. Then, by the time we want to address our mistakes, it’s too late.  We are then either faced with a possible court battle or giving in without a fight.  Here are three common mistakes people make when it comes to contracts. Ignore these mistakes at your peril.

Common Contract Mistake #1.

One of the most common mistakes in contract law is NOT having written agreements with EVERYONE you do business with. This includes family members and friends. Oftentimes when people have contractual relationships with family and friends they don’t see the need for a written document.  Having a document memorializing the expectations of all parties helps to avoid bigger problems down the road.  Why is it so important to have written agreements? Memory rarely serves anyone over 16 and the older you get, the more likely you will forget things.  Expectations are clearly defined and you avoid the problem of he said, she said. Avoid issues of ambiguity and vagueness. Most importantly, you have a paper trail.

Why don’t people have written agreements? Here are a few of the reasons I have heard from clients: “It’s family,” “It’s a friend,” “I trust the person,” “I’ve always done things with a handshake,” “I don’t want people to think I don’t trust them,” “It’s too much trouble.”

TAKE AWAY: Get It In Writing Or Pay Dearly Later!

Common Contract Mistake #2.

Another common mistake in contract law is NOT reading AND understanding agreements before signing them.  You may think I am making this up, because you think, Who would sign something without reading it?  I assure you I am not making this up.  There are countless court cases (and many to come) that back me up. People sign documents all the time without reading them.  Here are a few agreements that people enter into, without understanding what they are getting into: terms of use/terms of service, privacy statements, car rental agreements, apartment leases, mortgage documents, estate planning documents, and many more. Not only is it important to read documents before signing them, but it is also important to understand what you’re signing.  It’s crazy, but you’d be surprised how many adults sign away their rights without knowing they’ve done it. It happens all the time. 

Why do people sign things without reading and understanding what they sign?  Again, the word trust often is used. Here are some of the reasons I’ve heard: “I don’t need a contract with my husband or my sister,” “She’s my friend I trust her,” “We’ve done business together before,” “It’s too long to read,” “It’s too complicated,” “There is too much legalese,” “It doesn’t matter whether I read it or not I still have to sign it if I want the product,” “I don’t have time to read through the whole thing,” and so many more.

TAKE AWAY: Whether you read it or not, whether you understand what you have read or not, if you sign it, you will be held liable for what it says. THAT’s the Law!

Common Contract Mistake #3.

A third very common mistake in contract law is USING boilerplate templates without first vetting them. Contrary to popular belief, “boilerplate” does not mean do not review or customize.  There is enough case law to dispute the notion that boilerplate means ignore and do nothing.  Boilerplate gives you a place to start, but then the competent lawyer customizes all provisions of an agreement. Customization means taking into account the facts of a particular situation AND an understanding of the law.    

Why do people use documents without vetting them first? Among the answers, “They are easy to access online,” “Free or cheap than a lawyer,” “If it’s on the Internet I know it’s exactly what I need,” “It worked for my friend.” Yes, it’s easy to download a contract from the Internet or “cut and paste” an agreement together. But, when you don’t understand the legal implications of doing so, you suffer, maybe not today, but in the long run. 

Take Away: Invest in competent legal counsel while you have a choice. Or, wait until it’s too late and secure an attorney for your court case.

Francine D. Ward
Attorney-At-Law, Author, Speaker

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